The game Boehner appears to be playing is to stall long enough that whatever he passes out of the House is presented as an either/or choice. Either the Senate agrees to it letter-for-letter or time runs out and we default. In recognition of this, Harry Reid is willing to pay a healthy ransom, albeit with a bit of a twist. Nearly half the cuts would be premised on the end of the wars in Iraq and Afghanistan, which, you know, have not ended. If passed into law, this wouldn’t compel the end of the conflicts abroad, but it would mean that continuing to pay for them would throw our budget out of whack. Of course, that’s no change at all. At best, it might create a little resistance to further supplemental funding of the wars.
There’s a potential problem with Boehner’s strategy, however. It’s compelling because of the stark choice he presents. Both the president and all reasonable lawmakers are willing to do almost anything to avoid a default, but a short-term default is getting close to inevitable. Bills can sail through the Senate in record time if there is unanimous consent from all 100 senators. But if even one senator objects to a procedural move, it can take up to eight days to move a piece of legislation, even if it has the support of more than 60 senators. If the Senate and House bills are not identical, it can take even longer. In other words, Boehner’s dithering has already empowered any single senator to cause a short-term default.
And if there is a default of any length, suddenly Boehner’s leverage dissipates. It’s like killing the hostage. Of course, it’s not exactly the same because, in this case, the economy will still need reviving. But the Democrats will have a lot less reason to bend all the way over to accommodate the Republicans’ demands.
I think what the White House needs to do today is promise a veto of Boehner’s bill and make it very clear that proceeding in this fashion will guarantee at last a brief default. That would have been reckless last Friday but it makes sense today because there is no time left for alternatives and a default is almost assured anyway. It’s time to get out ahead of the news cycle and lay the blame where it belongs.
So what’s happened to “I’ll raise the debt ceiling until 2013” from Obama? Since the Rep’s have never seen a good Bill that they didn’t take hostage maybe it is time to kill their hostages.
I think once Boehner refuses to bring the Reid-Pelosi plan to the floor, it’s time to promise to use Executie authority to stave off a default under the theory that the 14th Amendment requires it, and direct Geithner to ignore the debt ceiling in th event that it hasn’t been raised.
The main problem with taking the Constitutional option isn’t the legal or political consequences, but the market reaction. Best to get that reaction a little ways before the deadline. If the market breathes a sigh of relief, Obama can give the Republicans the finger and move on; if it continues to freak, Boehner will know Obama can’t save him.
We can’t make progress as long as John Boehner has a scintilla of hope for his own career.
It is much better to do that on August 2. The fact that there is no panic yet shows that the markets know what the President can and can’t do if August 2 passes.
The main problem with working to obey the 14th amendment (it isn’t invoked, except rhetorically after August 2 passes) is that the FY2012 appropriations are not in place. The President can handle the crisis as a two month crisis with major deferrals of payments until Congress gets the new appropriations done. But even that is going to mean a lot of pain for people unless Geithner uses the sovereign power to issue currency to cover expenses for those two months.
The President cannot exceed the budget authorizations cumulative from all past appropriations bills (netted out for and subsequent rescissions).
As long as Obama acts responsibly, the situation is still one of the world financial industry having a problem instead of the US having a problem. And they will likely allow some latitude for things to work out.
But if Republicans continue their push and start playing the same games about a continuing resolution for FY2012 funding, expect some real unstable markets. No matter how responsible Obama acts, there is no way that he can reassure the markets under those circumstances, short of declaring a dictatorship and dissolving Congress. And no doubt, there are nihilists who would welcome just that alternative.
If the spending cuts that Obama will have to impose over two months to obey the 14th amendment don’t wake up people, we as a country are in one mell of a hess.
My prediction: Boehner comes up with a last-minute short-term (4 months) clean debt ceiling bill that builds in the agreed upon 4-month cuts to determine how much the debt ceiling is raised. And dares Obama to veto it. Or the Senate Democrats to stop it.
Both sides are in “four corners offense” mode, just waiting to get in that buzzer-beating shot of “we tried compromise but…”
Why I think the whole process is now off the rails. Boehner cannot get his caucus to even feint at raising the debt ceiling with a party-line vote, even if it would draw a Presidential veto. And his caucus will not agree to anything that would permit enough House Democrats to vote for the proposal.
The only question is who the public and the media blame for the failure.
So far despite all the media sturm und drang the security markets are not that depressed. It would be interesting to know who the counterparties to any of the hedging transactions are (other than computers).
How exactly can the President veto? Is this not the infamous bluff he warned Cantor not to call? The consequences are a heck of a lot worse than a simple shutdown, so I really don’t see how the President can afford to undercut his entire political position by being the one who “stopped a deal being made” and cost the country billions.
Sigh. You know it’s a really well run country we have when Rand Paul has more power at this point to save or destroy our nation’s short term finances than the President of the fucking United States…
You really have to credit the GOP … in the same way you would credit any slimy enemy who completely outfoxes you time and again.
Their leaders appear to look like buffoons, they make statements that appear to be signaling capitulation, they give ammunition that allows the Democrats to have winning moments at press conferences.
Yet in the end they get what they want. Reid’s proposal, as described by TPM today, basically is what the GOP was demanding just a few weeks ago, less the tie to the end of the wars. Since every proposal is subject to negotiation, we can expect that “tie” to be dropped. Meanwhile, the GOP just keeps adding more conditions, with their leaders shrugging their shoulders and blaming their crazy caucus.
Here we have a routine event – raising the debt ceiling – and the GOP is either going to get a default that will (you can be sure) end up being blamed on Obama or they are going to get a Koch-approved budget bill passed.
You have to hand it to them. I feel like I’m rooting for the Boston Generals and the GOP is the Globetrotters.
I’m calling my bank after all of this is said and done and figuring out what my loan interest might be the next time it’s calculated. If it goes up significantly, I’m going to have to pull some strings and have them paid off immediately with family savings and pay the family back with interest instead. Who knew two years after I took on variable interest rate loans that I’d go from, “Well variable interest rates aren’t bad; legally they can’t go up to this point, and they won’t be going anywhere anytime soon,” to “Well fuck…a default could mean a doubling of those rates.”
I hate Republicans so much. They ruin the lives of everyone and anyone they interact with; in this case, even a good deal of rich people.
Worst case: 50 basis points on T-bills. What does that translate to as it ripples to your loans?
Consider yourself fortunate to have finances to throw at it. Over half of the population won’t.
Oh, I am, and I do. I don’t know that those finances are there; I’m under the assumption that they are. And even if they are, I’m not sure there’s a willingness to give me access to them.
In fact I wrote a few papers on this very subject; sure, some kids don’t have to take out this much debt to go, but some kids don’t even have ACCESS TO DEBT (no cosigners, bad credit, etc).
It depends how it affects the 91 Day T-Bill. That’s why I have to call to see how much, say, a 50-basis change would affect the final calculation.
But in the end it depends on the market reaction:
http://krugman.blogs.nytimes.com/2011/07/24/moodys-blues-poor-standards-and-the-debt/?scp=2&sq=k
rugman&st=cse
More succinctly, it depends on the programmed trading algorithms, which have never seen data on a politically generated crisis like this one. From their perspective a “black swan” event. Which means that the randomness of the response of the programs is likely to increase as they thrash around.
Reminds one of the mutually assured destruction strategy of the Cold War and the “failsafe” systems devised to cope with the information uncertainty. The moniker DeadHand comes to mind.
Atrios has some skepticism about Congress acting quickly in response to a drop in the markets.
My expectation is that it would take a 3000-4000 point drop to make anyone pay attention to anything but the drama. But I find it hard to imagine that happening if folks are switching from T-bills to stocks and bonds to stocks. Wall Street has painted themselves into a corner. There is no good investment out there other than restarting the economy. Which they don’t want to risk because of their short-term time horizon.
Are you talking about this?
‘Cause I didn’t read that as skepticism so much as “the narrative of our culture is that the Congress is going to panic into doing something once the stock market starts falling – isn’t that strange?”
Except it isn’t strange, since folks on the left have a deeply embedded belief that Congress is beholden to rich corporations. So of course there’s a belief that if corporations and rich shareholders start to feel pain Congress will start reacting in earnest.
I don’t buy it myself because I’ve always thought that narrative was too reductionist to be true and ignores competing interests on the parts of individual politicians – which we’re seeing right now can actually trump the interests of their corporate masters under certain conditions.
My point is that a 100-200 point drop in markets is in no way pain for Wall Street. That’s a daily swing.
On your last paragraph, I think you’re right. Moreover I think that the Tea Party folks are so guided by their religously-held principles that they will ignore any information from outside their own media-driven base. When Rush and FoxNews capitulate (just to name two prominent ones), the Tea Party folks might consider it or they might attack Rush and FoxNews for deserting their principles.
Reminds we of a Dorothy L. Sayers quote:
“Read my lips: No new taxes.” is now weaponized.
Limbaugh has probably already moved his assets to China and other areas to try to blunt the impact on himself. Because that’s exactly the kind of unpatriotic selfish narcissist he is. He won’t back down – it would hurt his brand.
But I think you’re correct, and that the odds of backlash against Fox News and other conservative media outlets that “capitulate” eventually are high. But I don’t suspect that Fox News will switch gears on this – I think the Murdoch family is weak right now and Rupert’s influence over News Corp is at an all time low – so Ailes has a freer reign to fuck with things. And Ailes is more of his own man than most folks want to admit – he’s perfectly willing to drive the country into another Great Depression if that’s what it takes to get a Republican into the White House.
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"But I will not let myself be reduced to silence."Well Obama did threaten to veto the Dodge Duck and Dismantle bill so we will see.
So all that damn hysteria from liberals last week about the Democratic Caucus being left out of negotiations and the President not getting enough revenue in concession from Republicans will end with proposals from both Reid and Pelosi that raise NO revenues and only cuts, but liberals are perfectly ok with this? No chorus of “sell out!,” or “spineless!,” or “caver!,”?!
Um…of course it’s a desperate cave. Everybody is running out of real estate, and everybody is caving left and right. And it probably still won’t even make a difference towards getting a deal made in time. Who’s saying otherwise?
Right.
Whatever agreement is struck by Reid/Pelosi will be rationalized away that would not happen had the same agreement be struck by Obama. The assumption will be that Reid/Pelosi did their best negotiating against crazy people, while Obama sold them out or caved.
You’re still talking about hypotheticals. Thee is no legislative language yet, and until it exists there is no way to know whether there is going to be a potential sell-out or whether it’s just negotiation kabuki. As for the hysteria, I think there has been a temporary bout of exhaustion.
If the House Republicans do accept Reid’s proposal and an extension until after the 2012 election, then the screams will begin again. Pushing something like that through is exactly what the hysterical have been predicting. If it goes down that way, expect a loud chorus of “I told you so” and “stealth Republican”.
I still hunkering down for the delay of Social Security payments that are coming in August, caused by the negotiations with the IT contractor to get them done in the absence of a certain extension of the contract. It’s the little details, and especially the missed ones, that are going to make post-August 2 chaotic. In other words, I don’t see a deal happening in eight days.
Is there still silence from the WH?
GOPers are rallying behind a short term deal to bring the matter up again during 2012 election. Frum thinks this will hurt the GOP since we’ll basically be fighting over the Ryan plan when the entire electorate is watching.
Boehner’s Plan is finally out.
What a thing of beauty.